TM Retail chairman James Lancaster has historically shunned the limelight. Now, for the first time, he talks to James Durston about his plans for the company he took over in a management buyout last year
James Lancaster, chairman and CEO at TM Retail, is the kind of straight-talking, articulate and engaging personality that journalists love to interview. However, he&'s also reluctant to court any personal publicity and that, along with a tendency to be indiscreet (his own admission), is why every approach by the press to interview the man in charge of the UK&'s leading privately owned CTN and c-store operator has, until now, been rebuffed.
But in a change of heart that has allowed The Grocer exclusive access to TM Retail&'s headquarters in Brentwood, Essex, Lancaster finally reveals his plans for the company that he and 40 other managers took over in September last year.
There is a good reason for the sudden candour. &"What I want to get across is that the speculation is over,&" Lancaster says. &"The company is not for sale, the management owns the company and we&'re not in this for a quick two-minute turnover; we&'re in this for the future.&"
He is, of course, aiming his comments at those who wonder whether the company&'s latest MBO was a sincere move by a motivated management team or a desperate act by them to free the company from the private equity investors who had been trying to flog it for around three years. Much has already been said about the high asking price, well above the £145m that was finally agreed, and the many dead-end discussions with potential bidders that distracted the team from growing the company. Lancaster admits the business suffered during that period. &"When people were looking at buying the company, it wasn&'t developing as we would have liked,&" he says.
However, the new MBO signals a firm commitment to the company and the new management, motivated and incentivised, is ready to inject it with some much needed investment, he says.
Firstly, the operational fuzziness generated by the company&'s six different fascias - Dillons, Forbuoys, Martin&'s, McColl&'s, More and RS McColl (in Scotland) - will be sharpened up.
A total rebranding exercise will see all CTNs converted to the Martin&'s fascia and all c-stores converted to the McColl&'s fascia, except in Scotland, where RS McColl, already synonymous with CTNs, will be maintained. Stores will also be revamped internally and the IT systems and infrastructure will be overhauled, all of which will cost in the region of £45m.
A focused identity like this in a sector as diverse and fragmented as convenience is invaluable, says Lancaster, and a corporate name change to Martin McColl&'s is already planned. All this, though, is cosmetic. The real growth will stem from the second strand to Lancaster&'s strategy - acquisitions. &"We&'re going to invest a lot of money in acquisitions over the next two to three years, both in single sites and in chains. We&'ve got £50m allocated for single sites and we have access to additional funds for chains. In the past year alone, we&'ve bought more than 40 single site operations,&" he says.
This philosophy has driven TM Retail&'s strategy for some time. Since 1995 it has steadily built its store numbers and the estate now comprises some 1,300 outlets. The acquisition of 181 Dillons stores from Tesco two years ago was considered by some to be the bargain of the year and it&'s likely things will now speed up. &"We want to expand. Consolidation is the name of the game; you can either be a consolidator or a consolidatee - and we are keen to be one of the consolidators. You need to band together to get the buying power these days,&" Lancaster says.
Although he won&'t be drawn on the specifics of his shopping list, he does proffer some clues. For instance, the mix of TM Retail&'s estate has been a point of criticism in the past. With 900 CTNs, 320 c-stores and a handful of what are endearingly called &'variety&' stores, because defining them more precisely proves rather tricky, the company has a bit of a hotchpotch feel. Lancaster suggests this will be cleaned up. &"We will be converting some CTNs to c-stores over the next couple of years. I don&'t want to give the impression I&'m not interested in newsagents. I still like newsagents and I&'m quite happy to buy them. But the best c-stores develop from a CTN base - it&'s a natural evolution.&"
If you follow the logic through, it&'s also likely the variety stores will be sold. But this doesn&'t mean TM Retail will become a pure c-store operation. Despite the problems in the CTN sector, with sales of tobacco and newspapers falling and the confectionery sector having reached maturity years ago, some of the key players in the sector reported significant growth in The Grocer&'s Top 50 survey (The Grocer, 11 February 2006, p27) and Lancaster is certain there&'s still money to be made. Indeed, he&'s as scornful of those who predicted the demise of the CTN five years ago as he is of those who said TM Retail&'s first MBO in 1995 wouldn&'t work. &"In retailing it&'s all about location and products. There&'s a big overlap between CTNs and
c-stores but they are both profitable in their own right. I just want to get greater market share.&"
He adds: &"A lot of the time these commentators don&'t know what they&'re talking about. If you go back to 1995, some were saying that our MBO then wouldn&'t be successful because people would only want to shop in superstores. That was rubbish. It was very successful. I&'ve spent my life working in mature markets and I&'m not scared of them.&"
That experience and confidence will be well supported now that the management team owns 80% of the company. Bank of Scotland owns the remaining 20% and provided the financial backing for the MBO, but has little influence over operations. &"We&'re pretty much free to do our thing,&" says Lancaster.
He suggests this team will remain in place for some time. Given that he banked the first week&'s takings in 1972 of what was then a fledgling TM Retail in the guise of a cigarette vending business, you could forgive him for feeling possessive. &"I&'ve always felt a degree of ownership of the business, and the management team has always behaved as if it owns the business. The difference now is that we actually do.&"
The message he wants to get across is that this will be no short-term fling. He recently stepped down from one of his non-executive directorships elsewhere to devote more time to TM Retail and he says he enjoys it too much to consider giving it all up yet. &"I&'m committed to TM Retail for the foreseeable future. So far this has been the most tremendous fun. I&'ve had the benefit of working with some great people, and I&'ve been lucky enough to make a few bob along the way. When I look back it&'s clear we&'ve created a leading retailer and I&'m proud of the team.&"
With that kind of confidence, it would take a brave punter to bet against TM Retail growing even bigger still. n
timeline to the top
1972 Under the aegis of Gallaher, Lancaster sets up a cigarette vending business 1982 A drinks vending business is added to the cigarette vending 1993 The first move into retail is made when Lancaster takes Forbuoys under his wing 1995 The first MBO at TM Group is completed, including the cigarette and drinks vending businesses 1998 TM Group is refinanced producing partial exit for the shareholders 1998 Martin Retail Group is bought for £75m. The name TM Retail is created 2000 The cigarette vending business is sold 2001 The drinks vending business is sold 2004 TM Retail buys 181 Dillons stores from Tesco 2005 A second MBO gives Lancaster and the management team 80% control of the company. Sales top £640m 2006 The estate is rebranded under the Martin's and McColl's fascias, the company name is changed and Lancaster reveals plans to increase acquisition activity 2010 The major force in neighbourhood retailing?
James Lancaster, chairman and CEO at TM Retail, is the kind of straight-talking, articulate and engaging personality that journalists love to interview. However, he&'s also reluctant to court any personal publicity and that, along with a tendency to be indiscreet (his own admission), is why every approach by the press to interview the man in charge of the UK&'s leading privately owned CTN and c-store operator has, until now, been rebuffed.
But in a change of heart that has allowed The Grocer exclusive access to TM Retail&'s headquarters in Brentwood, Essex, Lancaster finally reveals his plans for the company that he and 40 other managers took over in September last year.
There is a good reason for the sudden candour. &"What I want to get across is that the speculation is over,&" Lancaster says. &"The company is not for sale, the management owns the company and we&'re not in this for a quick two-minute turnover; we&'re in this for the future.&"
He is, of course, aiming his comments at those who wonder whether the company&'s latest MBO was a sincere move by a motivated management team or a desperate act by them to free the company from the private equity investors who had been trying to flog it for around three years. Much has already been said about the high asking price, well above the £145m that was finally agreed, and the many dead-end discussions with potential bidders that distracted the team from growing the company. Lancaster admits the business suffered during that period. &"When people were looking at buying the company, it wasn&'t developing as we would have liked,&" he says.
However, the new MBO signals a firm commitment to the company and the new management, motivated and incentivised, is ready to inject it with some much needed investment, he says.
Firstly, the operational fuzziness generated by the company&'s six different fascias - Dillons, Forbuoys, Martin&'s, McColl&'s, More and RS McColl (in Scotland) - will be sharpened up.
A total rebranding exercise will see all CTNs converted to the Martin&'s fascia and all c-stores converted to the McColl&'s fascia, except in Scotland, where RS McColl, already synonymous with CTNs, will be maintained. Stores will also be revamped internally and the IT systems and infrastructure will be overhauled, all of which will cost in the region of £45m.
A focused identity like this in a sector as diverse and fragmented as convenience is invaluable, says Lancaster, and a corporate name change to Martin McColl&'s is already planned. All this, though, is cosmetic. The real growth will stem from the second strand to Lancaster&'s strategy - acquisitions. &"We&'re going to invest a lot of money in acquisitions over the next two to three years, both in single sites and in chains. We&'ve got £50m allocated for single sites and we have access to additional funds for chains. In the past year alone, we&'ve bought more than 40 single site operations,&" he says.
This philosophy has driven TM Retail&'s strategy for some time. Since 1995 it has steadily built its store numbers and the estate now comprises some 1,300 outlets. The acquisition of 181 Dillons stores from Tesco two years ago was considered by some to be the bargain of the year and it&'s likely things will now speed up. &"We want to expand. Consolidation is the name of the game; you can either be a consolidator or a consolidatee - and we are keen to be one of the consolidators. You need to band together to get the buying power these days,&" Lancaster says.
Although he won&'t be drawn on the specifics of his shopping list, he does proffer some clues. For instance, the mix of TM Retail&'s estate has been a point of criticism in the past. With 900 CTNs, 320 c-stores and a handful of what are endearingly called &'variety&' stores, because defining them more precisely proves rather tricky, the company has a bit of a hotchpotch feel. Lancaster suggests this will be cleaned up. &"We will be converting some CTNs to c-stores over the next couple of years. I don&'t want to give the impression I&'m not interested in newsagents. I still like newsagents and I&'m quite happy to buy them. But the best c-stores develop from a CTN base - it&'s a natural evolution.&"
If you follow the logic through, it&'s also likely the variety stores will be sold. But this doesn&'t mean TM Retail will become a pure c-store operation. Despite the problems in the CTN sector, with sales of tobacco and newspapers falling and the confectionery sector having reached maturity years ago, some of the key players in the sector reported significant growth in The Grocer&'s Top 50 survey (The Grocer, 11 February 2006, p27) and Lancaster is certain there&'s still money to be made. Indeed, he&'s as scornful of those who predicted the demise of the CTN five years ago as he is of those who said TM Retail&'s first MBO in 1995 wouldn&'t work. &"In retailing it&'s all about location and products. There&'s a big overlap between CTNs and
c-stores but they are both profitable in their own right. I just want to get greater market share.&"
He adds: &"A lot of the time these commentators don&'t know what they&'re talking about. If you go back to 1995, some were saying that our MBO then wouldn&'t be successful because people would only want to shop in superstores. That was rubbish. It was very successful. I&'ve spent my life working in mature markets and I&'m not scared of them.&"
That experience and confidence will be well supported now that the management team owns 80% of the company. Bank of Scotland owns the remaining 20% and provided the financial backing for the MBO, but has little influence over operations. &"We&'re pretty much free to do our thing,&" says Lancaster.
He suggests this team will remain in place for some time. Given that he banked the first week&'s takings in 1972 of what was then a fledgling TM Retail in the guise of a cigarette vending business, you could forgive him for feeling possessive. &"I&'ve always felt a degree of ownership of the business, and the management team has always behaved as if it owns the business. The difference now is that we actually do.&"
The message he wants to get across is that this will be no short-term fling. He recently stepped down from one of his non-executive directorships elsewhere to devote more time to TM Retail and he says he enjoys it too much to consider giving it all up yet. &"I&'m committed to TM Retail for the foreseeable future. So far this has been the most tremendous fun. I&'ve had the benefit of working with some great people, and I&'ve been lucky enough to make a few bob along the way. When I look back it&'s clear we&'ve created a leading retailer and I&'m proud of the team.&"
With that kind of confidence, it would take a brave punter to bet against TM Retail growing even bigger still. n
timeline to the top
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